Good for sellers as housing market breaks records
Few homes for sale
‘Unprecedented’ is a word being used often by estate agents and economists at the moment. “In fact, the market is so lively that one record is being broken after the other,” says Ólafur Sindri Helgason, chief economist at the housing and infrastructure agency.
The selection of homes for sale has never been smaller: 4,000 homes were on the market across Iceland last spring and only 2,000 today. The difference in the capital region on its own is even more striking: 2,200 homes a year ago and 940 today.
Reduced interest rates have massively increased demand. The proportion of non-inflation-indexed mortgages has never been higher, and a record number of purchase contracts have been signed every month since the autumn, with each home staying on the market for a shorter time than ever.
Nationally, homes take an average of 75 days to sell—though that reduces to 45 days in the capital. “There is so much demand on the market that people are buying homes without looking at them very well. People are buying homes without conditions in purchase offers. Really, these properties are being fought over and buyers are outbidding one another.” A fifth of properties in shared buildings in the capital are now selling for above asking price and over a quarter of detached homes are going for more than asking price.
Bought without viewing
There are even examples of people buying homes without viewing them first. Guðmunda Björnsdóttir has lived overseas for 19 years, most recently in Germany, but moved to Hafnarfjörður with her husband this year. She says they needed to act quickly: “There was really nothing we could do except buy before we came home, if we could find anything. Then, we found this place and sent family to the open house. Two days later we had our offer on the property approved. Good properties are just flying off the shelves, so you really have no thinking time,” Guðmunda says. As well as being a recent buyer, she is also studying to become a certified estate agent.
Guðmunda says there is no doubt it is a seller’s market today. “I cannot imagine better circumstances for sellers: low interest rates, little on offer, and everyone excited to buy.” Ólafur Sindri agrees: “It is clearly a seller’s market today.”
Prices must peak
There is a lot of demand, not a lot on offer, and the Federation of Icelandic Industries says there are fewer brand-new homes under construction than planned—the fewest in four years, even. It is therefore not a surprise that prices are rising, but for how long? “There must come a time when prices reach a peak, when people can simply no longer accept the going prices, if it goes up very quickly,” Ólafur Sindri says; adding that it is impossible to say when that will happen.
There are various factors at play. Ólafur Sindri says that people have been willing to increase their debt levels during and economic recession like never before because of low interest rates, but the rates could change and some may struggle to pay mortgages in the future if they do. On the other hand, there are the people who are still waiting to buy and who may not be able to afford to if prices continue to rise out of proportion with wage inflation. Both these factors could serve to slow property price inflation in the medium and long term.